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Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your
thoughts on market moves: josephine.mason.thomsonreuters.com@reuters.net

A TALE OF TWO PERIPHERIES (1551 GMT)

A divergence in southern European markets, which so often in the past have traded as a bloc,
appears to be growing wider still. Ratings decisions after the close of markets on Friday may
well add to that picture.

First there's Italy - its economy is in recession and growth forecasts have been slashed by
economists in recent months. Commerzbank reckons that Moody's, which rates Italy Baa3 with a
stable outlook, could shift that view to negative, raising the risk of a downgrade in the months
ahead. Not great news for the country's banks â€“ a big holder of domestic government debt.

And then Portugal - it will be reviewed by S&P Global and may well be poised for an upgrade
given its stronger growth prospects, say analysts.

The contrasting fortunes are evident in stocks too: over the past year, the Milan bourse
has underperformed the euro-zone index by 5 percent, while Lisbon is
off just 0.6 percent.

For sure, the prospect of lower rates for longer and more cheap ECB loans for banks has
boosted stock and bond markets across the periphery, but the divergence in southern European
markets, which began after Italy's political crisis in May last year, looks set to continue.

Below you can see the diverging fortunes of the two countries' stock and bond markets over
the past year:

(Dhara Ranasinghe and Josephine Mason)

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READING THE CHARTS (1345 GMT)

As investors wonder how much longer the global equity rally can last, chartists are pointing
to some bullish technical signals on European bourses that may help stocks grind even higher.

The euro-zone STOXXE pierced its 300-DMA and London's FTSE 100 hit its 200-day
moving average this morning, the latest sign the market's upward momentum is building.

The first significantly bullish sign for the FTSE 100 was on Jan. 30 when the 20-day
MA pierced the 50-day, says Mike van Dulken, head of research at Accendo Markets.

The third, a most significant, would be if the 50-day MA breaches the 200-day MA, with the
short-term trend crossing the long-term one and forming a bullish "golden cross" chart.

It may take another couple of weeks of gains for the FTSE to get there and fundamentals from
Brexit news to economic data could derail all that, but if it does, it'd be a major breakout
from recent ranges and potentially point to another leg higher.

(Josephine Mason)

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CANARY IN THE U.S. EARNINGS MINE (1220 GMT)

While investors shovel money with enthusiasm at U.S. stocks, profit margins are painting a
different picture.
Analysing profit margins derived from national economic accounts (NIPA), U.S. corporate
margins don't look as strong once favourable tax treatments and economic cycles are accounted
for, according to Blackrock Investment Institute strategists.

They say that a global earnings recession is very likely in 2019 as U.S. corporate margins
have likely peaked. Earnings are a key driver for equity returns over the long term.

Data from U.S. national accounts is a better indicator as profit margins tend to lead
benchmark stock index margins, such as those of the S&P 500 and turning points in NIPA
margins precede those of the S&P by an average three quarters.

(Saikat Chatterjee)

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IS IT GOOD TO BE PASSIVE? (1141 GMT)

Should one be active or passive? A new report suggests passive investing, on a roll in
recent years, will overtake its older, better-established cousin in the United States by 2021.

The report, by Moody's, says its data showed record outflows from U.S. active funds last
year: active investment strategies' share of the total declined to 63.3 percent, from 75 percent
in 2013.

The share of passive investment on the other hand has risen steadily and is set to exceed 50
percent by 2021, Moody's projects, versus an estimated 36.7 percent last year.

The boom is global. Fundamentally, it's driven by the belief that index-tracking vehicles
such as ETFs are more efficient at channelling corporate earnings into investors' pockets as
they cut out hefty fees and commissions to fund managers and traders.

But there are other drivers too. For one, there is growing concentration in the active
industry as more money migrates to a small pool of superior managers. Second, there's a trend
towards even lower-fee passive products -- Fidelity, for instance, has launched a suite of
zero-fee ETFs, Moody's notes.

Here, the EU's MiFID 2 rules are helping as these provide better visibility into the fees
that active funds are charging.

"These changes will likely push retail investors toward cheaper passive funds, including
ETFs, just as they become more widely available through investment online platforms," Moody's
concludes.

Whether the passive strategy pays off in these turbulent times, with wild intraday swings in
indices and stock prices in recent months, remains to be seen.

(Sujata Rao)

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TGIF!... AND NO BREXIT VOTE TODAY! (1131 GMT)

A deal, no deal, a delay - this roughly summarises the chaotic week in the British
parliament.

And today, some comfort that the chances of avoiding a no-deal Brexit are rising ... and
perhaps a little relief there's no complex Brexit-related vote this evening to contend with.

The market's certainly in a risk-on mood. The relief along with hopes about a U.S.-China
trade truce appear to be pervading equities, with the pan-European STOXX 600 up 0.7 percent and
the FTSE 100 up 0.8 percent, both likely to finish with their best weekly performance in a
month.

Even sterling is taking a breather today after a bumpy ride this week, which saw volatility
has hit levels not seen since early January.

Still, the exuberance across equities may be a little overdone given the huge amount of
uncertainty about the process - PM May heads to Brussels for a summit on Thursday -, slowing
economic growth and the fact there hasn't been much more than rhetoric around the U.S.-China
trade talks, says deputy chief investment officer Edward Park at asset manager Brooks MacDonald.

He says it's still difficult to get too excited about euro-zone and UK equities given all
the headwinds.

"There are still quite a lot of moving parts (to Brexit .......) There will only be limited
respite or buying opportunities," he says.

And for any tweeples among our readers: https://twitter.com/i/status/1106479513108656128

(Thyagaraju Adinarayan and Josephine Mason)

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OPENING SNAPSHOT: TECH HELPS EUROPE HIT 5-MONTH HIGHS (0903 GMT)

European shares have managed to breach, by a whisker, Thursday's Oct. 5 high in opening
deals, as the appetite for riskier assets spreads from Asia overnight after positive signs over
U.S.-China trade talks. Tech stocks, often vulnerable to tension tensions, are the biggest
gainer.

Investors don't seem to be tiring of the Brexit news either - London's FTSE 100 is
leading the show today, up 0.5 percent, lifted by its heavyweight oil and mining stocks, but
even the domestically focused midcaps are rising even as sterling takes a breather after
a volatile week.

Wirecard is at the bottom of the STOXX 600 after a Citi downgrade, compounding the
German payment company's woes amid a probe of its Asian business, while H&M is down almost 5
percent after its Q1 sales.

Here's your snapshot:

(Josephine Mason)

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ON OUR RADAR: COURT- AND BOARDROOM DRAMAS (0750 GMT)

There's not much in the way of corporate earnings with the results season nearly over.

Better-than-expected results from U.S. chipmaker Broadcom may boost competitors in the euro
zone.

H&M, the world's second-biggest fashion retailer, has reported in-line Q1 sales growth,
while British pubs group JD Wetherspoon saw a drop in H1 profits as it battles high labour
costs.

Otherwise it's court and boardroom drama galore.

VW will be in focus after the U.S. Securities and Exchange Commission filed a civil suit
against Volkswagen and its former chief executive Martin Winterkorn over the German automaker's
diesel emissions scandal, accusing the company of perpetrating a "massive fraud" on U.S.
investors.

UBS shares are seen under pressure after Switzerland's top bank said it is bulking up its
litigation provisions to deal with a French court slapped it with a hefty penalty last month.

The news comes a day after Hong Kong's securities regulator banned the bank from leading IPO
in the city for a year and hit it with a fine.

Nordic banks will remain in focus after a Swedish TV programme reported that an internal
Swedbank report dated last September showed transactions corresponding to 95 billion Swedish
crowns between "suspicious" customers in Swedbank and Danske Bank had been done between
2007-2015 in the Baltics.

The shareholder showdown continues at Telecom Italia, with the board giving its backing
Chairman Fulvio Conti, who is embroiled in a row with the company's top investor, French media
group Vivendi.

Investors appear to be drawing continued strength from the positive noises coming out of the
talks between Washington and Beijing to end their protracted dispute over trade and after UK
lawmakers voted to delay the country's chaotic (and protracted) exit from the EU.

All the major European stock futures are in positive territory, with the trade-sensitive DAX
leading the pack, up 0.2 percent.

How long it can last ahead of the weekend and a crucial European summit for UK PM May next
Thursday is yet to be seen.

But for now, there's a risk-on appetite in the air.

(Josephine Mason)

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TRADE, BREXIT OPTIMISM SEEN LIFTING EUROPE (0642 GMT)

European shares are expected to continue their march higher this morning, extending
yesterday gains that saw them hit five-month highs, amid continued optimism over U.S.-China
trade talks and the UK's chaotic exit from the European Union.

Yesterday, the STOXX 600 got within a whisker of piercing the Oct. 5 high of 379.83 level
and is on track for its best week since mid-February.

Financial spreadbetters IG expect London's FTSE to open 15 points higher at 7,200,
Frankfurt's DAX to open 19 points higher at 11,607 and Paris' CAC to open 7 points higher at
5,357.

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